Decomposing the productivity differences between hospitals in the Nordic countries

Previous studies indicate that Finnish hospitals
have significantly higher productivity than in the other
Nordic countries. Since there is no natural pairing of observations
between countries we estimate productivity
levels rather than a Malmquist index of productivity differences,
using a pooled set of all observations as reference.
We decompose the productivity levels into technical
efficiency, scale efficiency and country specific possibility
sets (technical frontiers). Data have been collected on operating
costs and patient discharges in each diagnosis related
group for all hospitals in the four major Nordic
countries, Denmark, Finland, Norway and Sweden. We
find that there are small differences in scale and technical
efficiency between countries, but large differences in production
possibilities (frontier position). The countryspecific
Finnish frontier is the main source of the Finnish
productivity advantage. There is no statistically significant
association between efficiency and status as a university or
capital city hospital. The results are robust to the choice of
bootstrapped data envelopment analysis or stochastic
frontier analysis as frontier estimation methodology.